Inside the Mysterious World of Tech CEO Succession Planning

Software arch-rivals SAP and Oracle take starkly different approaches to CEO succession planning, as do 'frenemies' Microsoft and Apple. Who's right? Customers and analysts say more information on who will be steering the ship is better.

Why CIOs Care About Vendor CEOs

But over the long haul of software generations, how much does the CEO of a business software vendor, like SAP or Oracle or Microsoft, actually matter?

A June article in the Atlantic Online examined the importance of CEOs and found that "many of the most prominent and widely cited business-school professors and other experts believe that the American obsession with who sits at the top of the organizational chart has gone much too far." In the article, James March, a Stanford management professor, states that inside any well-run company that pays attention to grooming its managers, "candidates for the top job are so similar in their education, skills and psychology as to be virtually interchangeable," notes the article. "All that matters is that someone be in charge."

IT customers such as Ron Bonig, the recently retired CIO of The George Washington University, say that the answer to the question of high-tech CEO importance is "it depends." With smaller tech vendors, the focus is more on the product rather than the leader, Bonig says, since there's "a high likelihood that one of the giants will swallow them up."

But with an SAP, Oracle or Microsoft, Bonig says, "those are the companies that CIOs watch more closely," he says. Why? First, because they have products that are critical to CIOs' enterprises, and second, those vendors are so closely held by or identified with a charismatic founder or cofounder CEO that the CEO can have an overriding influence on the direction of the company, Bonig contends.

As an example, Bonig says that if Microsoft's Ballmer decides tomorrow that he wants Microsoft out of the server software business—"and he could probably make it happen," he says—that would throw the industry into a scramble. "There would be alternatives, but losing that corporate direction that CIOs count on would make CIOs very nervous," Bonig says. "Reading the tea leaves and trying to predict what's viable down the road, and which technology horses have the legs to go the distance, is one of the traits of a successful CIO, and any factors which make that future foggy make us nervous."

Current and near-term future leaders at enterprise software companies such as SAP, Oracle and Microsoft face an astonishingly difficult environment: this includes a global contraction of business on top of a massive Internet-driven upheaval in how companies purchase, implement and consume business software. Thus it's reasonable to think that the CEO setting strategy and the future roadmap is key. "When someone sets the tone and says this is where we're going to be in these next five years, these are the things we are going to conquer, achieve and do for you," says Wang, "and if the CEO can set those things with such authority and momentum, that's where the difference comes."

Yvonne Genovese, a VP and distinguished analyst at Gartner, says that the leaders at SAP and Oracle, in particular, face enormous pressures and vexing hurdles. "Neither vendor has a strong all encompassing vision for next generation computing—each are dabbling in many areas but pretty much most things are the same," Genovese says, via e-mail. "Given that both companies can't really sacrifice maintenance from a large installed base in favor of dramatic changes to their products, it may leave room for future leaders of software to emerge."

Shai Agassi Throws SAP Curve Ball

Leo Apotheker's promotion to SAP's CEO role wasn't always a sure thing. Those familiar with enterprise software and SAP will remember the name Shai Agassi: His outsider status at SAP, next-generation appeal and formidable charisma led to a meteoric rise within SAP's ranks, eventually holding the title of president of SAP's product and technology group.

Apotheker and Agassi were both in the running to become Kagermann's co-CEO and eventually succeed him. But in early 2007, when SAP's supervisory board extended Kagermann's contract for another year (as they did again in 2008), Agassi left SAP to launch an idea he had been thinking about for some time: Better Place, a company developing a transportation system for fleets of electric cars and charging stations to power the vehicles. (For more, see "From SAP ERP Software to Saving the World: Catching Up with Shai Agassi.")

Agassi's abrupt departure was not part of the plan. "Shai surprised us, because he was the youngest among the next apparents here," says Heitmann. "That was unforeseeable and unplanned and a disruptive event, but that was nothing that I would put into the basket of a managed CEO transition." Agassi's lack of total commitment to SAP also didn't sit well with Hasso Plattner, chairman of the supervisory board, Heitmann recalls.

It may not have been part of the plan, but it certainly made the new CEO choice easier for SAP's supervisory board. And the window of opportunity for Apotheker to transition into the role, with a year as Kagermann's co-CEO, was just right, says Heitmann. During the past year, Apotheker's final grooming kicked into high gear: he gradually became more visible at SAP media events, key partner and customer meetings, and on quarterly conference calls. This is all part of the plan to ensure that relevant stakeholders get to know the next CEO, says Heitmann. "I think the investors and customers value this degree of predictability and continuity."